February 18, 2025
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”), in which you seek correction of the retail sales and use tax assessment issued for the period January 2015 through December 2019.
FACTS
An audit was conducted on the books and records of the Taxpayer, an event planner and operator of an event venue, for the period at issue. As a result of the audit, an assessment was issued for untaxed sales because the Taxpayer included tangible personal property and overnight accommodations with its rentals of the event venue. The Department conducted an audit for a five-year period because the Taxpayer was not registered for sales tax prior to the audit.
The Taxpayer filed an application for correction contending that its sales are not subject to tax because it was merely providing event planning services and did not sell tangible personal property. In addition, the Taxpayer asserts any overnight rentals were incidental to the rental of the venue.
DETERMINATION
Event Planning
The Taxpayer characterizes its activities as an event planner. The information provided does not indicate whether its activities are available for any event location or limited exclusively for events held at its venue. Virginia Code § 58.1-609.5 1 provides, in pertinent part, that the retail sales and use tax does not apply to “[P]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made.” The Department has held that event planning services may be provided exempt from the responsibility of collecting and remitting retail sales and use tax when the “true object” of the transactions was the planner’s expertise and creativity in developing and arranging conferences or special events and negotiating with dealers for various products and services in the production of such events. See Public Document (P.D.) 97-84 (2/19/1997).
The Taxpayer asserts that its operations are closely related to the taxpayer in P.D. 18-215 (12/28/2018) because it primarily engaged in event planning services and there was no sale of tangible personal property. In this determination, the event planner was found to be engaged in non-taxable services when it purchased tangible personal property using its clients’ funds so long as there is no mark-up. The vendors contracted directly with the clients and charged sales tax, as appropriate, and the sales tax was paid to the vendors when the event planner paid the invoices on behalf of the clients. In the present case, the evidence available during the application for correction process fails to support the Taxpayer’s description of its business operations. This point will be further discussed below in the section styled “Taxpayer Records.”
Event Venue Rental
The Taxpayer claims that its facility was used for five days in 2015 with no overnight stays, nine days in 2016 with three overnight stays, eight days in 2017 with two overnight stays, ten days in 2018 with one overnight stay, and thirteen days in 2019 with three overnight stays.
Virginia Code § 58.1-603 4 provides that the sales tax applies to “gross proceeds derived from the sale or charges for accommodations furnished to transients as set out in the definition of ‘retail sale’ in Virginia Code § 58.1-602.” The Department has interpreted the definitions of “retail sale,” “accommodations,” and “transient” found in Virginia Code § 58.1-602 to require an overnight stay for tax to apply to the rental of venue space without the transfer of tangible personal property. See P.D. 87-69 (2/27/1987) and P.D. 89-257 (9/25/1989). Conversely, the Department has ruled that fees charged for the use of real property, for which an overnight stay was not provided, were taxable when the total charge included the provision of tangible personal property. See P.D. 87-69, P.D. 98-85 (5/19/1998), P.D. 02-38 (4/1/2002), P.D. 12-82 (5/11/2012), and P.D. 23-74 (6/23/2023).
The Taxpayer contends that its operations were nearly identical to those in P.D. 95-158 (6/16/1995). In that determination, the Department discussed a historic plantation that rented the mansion and grounds out for weddings, receptions, and similar events. Because the plantation did not rent rooms and accommodations to transients on a regular basis, only those rental transactions that included the provision of food and beverages were taxable. This ruling is consistent with the Department's current policy that the rental of facilities by entities that are not in the regular business of renting rooms and accommodations to transients are dealers for retail sales tax purposes only when the charges include the provision of tangible personal property such as food and beverages, tables and chairs, or other items for entertaining. See P.D. 13-212 (11/14/2013) and P.D. 23-74.
While the Taxpayer’s rental of overnight accommodations may not have been a regular part of its business and it did not sell food and beverages, all of its wedding packages apparently included tables, chairs, and bench seating. The inclusion of such tangible personal property with real property facilities in a venue rental package for which one lump charge is made is subject to sales tax. See P.D. 10-242 (10/21/2010) and P.D. 23-74, which appear to closely resemble the Taxpayer’s operations.
Taxpayer Records
The issue in this case, however, is not whether the Taxpayer’s operations differed from or were similar to the businesses in P.D. 95-158, P.D. 18-215, or P.D. 23-74. Instead, the Taxpayer has failed to provide documentation of its business transactions that would evidence its operational activities and verify the taxability of such transactions.
During the performance of the audit, copies of contracts evidencing the services, realty, accommodations, and tangible personal property included in the wedding packages were requested. The Taxpayer responded that it did not maintain written contracts with its customers.
Under Virginia Code § 58.1-633 A, dealers are required to “keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.” Title 23 of the Virginia Administrative Code (VAC) 10-210-470 also provides that a dealer is “required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.”
The purpose of an audit by the Department is to evaluate a dealer’s sales and use tax compliance. A dealer is required to maintain proper records and provide them for inspection, such that its sales and use tax compliance can be determined.
CONCLUSION
Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed to be prima facie correct and that the burden is on the taxpayer to prove the assessment is erroneous or incorrect. Because the Taxpayer failed to provide adequate documentation to authenticate its activities, the entire proceeds from the package sales were properly held as subject to tax.
Accordingly, the assessment is upheld. An updated bill, with interest accrued to date, will be sent to the Taxpayer. The outstanding balance should be paid within 30 days of this determination to avoid additional interest charges.
The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/3460.B